SEC Filings

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1996, is currently producing an average of 3,000 barrels of oil and 6.0 MMcf of
gas per day. The Garden Banks Block 117 #1 well, which began producing in July
1996, is currently producing an average of 5,400 barrels of oil and 9.7 MMcf of
gas per day. Flextrend Development owns a 50% working interest in each of
these properties, subject to certain reversionary interests.
Tatham Offshore was obligated to make demand charge payments to the Partnership
pursuant to certain transportation agreements. Production problems at Ship
Shoal Block 331 and reduced oil production from the Ewing Bank 914 #2 well have
adversely affected Tatham Offshore's ability to pay demand charges under these
agreements. Effective February 1, 1996, the Partnership agreed to release
Tatham Offshore from all remaining demand charge payments under certain
transportation agreements, a total of $17.8 million. Under these agreements, the
Partnership was entitled to receive demand charges of $8.1 million in 1996, $6.0
million in 1997, $3.0 million in 1998 and $0.7 million in 1999. In exchange,
the Partnership received 7,500 shares of Tatham Offshore Senior Preferred Stock.
Each share of the Senior Preferred Stock has a liquidation preference of $1,000
per share, is senior in liquidation preference to all other classes of Tatham
Offshore stock and has a 9% cumulative dividend, payable quarterly. Commencing
on October 1, 1998 and for a period of 90 days thereafter, the Partnership has
the option to exchange the remaining liquidation preference amount and accrued
but unpaid dividends for shares of Tatham Offshore's Convertible Exchangeable
Preferred Stock with an equivalent market value. Further, the Partnership has
made an irrevocable offer to Tatham Offshore to sell all or any portion of the
Senior Preferred Stock to Tatham Offshore or its designee at a price equal to
$1,000 per share, plus interest thereon at 9% per annum less the sum of any
dividends paid thereon. The Convertible Exchangeable Preferred Stock is
convertible into Tatham Offshore common stock based on a fraction, the numerator
of which is the liquidation preference value plus all accrued but unpaid
dividends and the denominator of which is $0.653 per share. In addition, the
sum of $7.5 million was added to the Payout Amount under the Purchase and Sale
Agreement. By adding $7.5 million to the Payout Amount, the Partnership is
entitled to an additional $7.5 million plus interest at the rate of 15% per
annum from revenue attributable to the Assigned Properties prior to reconveying
any interest in the Assigned Properties to Tatham Offshore. Tatham Offshore
waived its remaining option to prepay the then-existing Payout Amount and
receive a reassignment of its working interests. Tatham Offshore and the
Partnership also agreed that in the event Tatham Offshore furnishes the
Partnership with a financing commitment from a lender with a credit rating of
BBB- or better covering 100% of the then outstanding Payout Amount, the interest
rate utilized to compute the Payout Amount shall be adjusted from and after the
date of such commitment to the interest rate specified in such commitment,
whether utilized or not. Tatham Offshore also agreed to grant the Partnership
the right to utilize the Ship Shoal Block 331 platform and related facilities at
a rental rate of $1.00 per annum for such period as the platform is owned by
Tatham Offshore and located on Ship Shoal Block 331, provided such use, at the
time proposed, does not interfere with lease operations or other activities of
Tatham Offshore. In addition, Tatham Offshore granted the Partnership a right
of first refusal relative to a sale of the platform. Tatham Offshore remains
obligated to pay the commodity charges under these agreements as well as all
platform access and processing fees associated with the Viosca Knoll Block 817
lease. For the year ending December 31, 1996, Tatham Offshore is obligated to
pay $1.6 million in platform access fees.
The Partnership Credit Facility, as amended and restated on March 26, 1996, is
a revolving and term credit facility providing for up to $220.0 million of
available credit in the form of a $145.0 million revolving credit facility and
$75.0 million term loan facility. Proceeds from the revolving credit facility
are available to the Partnership for general partnership purposes, including
financing of capital expenditures, for working capital, and subject to certain
limitations, for paying the Minimum Quarterly Distribution, as defined in the
Partnership Agreement. The revolving credit facility can also be utilized to
issue letters of credit as may be required from time to time. As of June 30,
1996, borrowings totaled $75.0 million under the term facility and $118.0
million under the revolving credit facility. As of August 12, 1996, borrowings
totaled $75.0
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